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Form To Amend Tax Return

Form to amend tax return 9. Form to amend tax return Tax Treaty Benefits Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Treaty Income Some Typical Tax Treaty BenefitsPersonal Services Teachers, Professors, and Researchers Employees of Foreign Governments Students, Apprentices, and Trainees Capital Gains Resident Aliens Reporting Treaty Benefits Claimed Introduction A nonresident alien (and certain resident aliens) from a country with which the United States has an income tax treaty may qualify for certain benefits. Form to amend tax return Most treaties require that the nonresident alien be a resident of the treaty country to qualify. Form to amend tax return However, some treaties require that the nonresident alien be a national or a citizen of the treaty country. Form to amend tax return See Table 9-1 for a list of tax treaty countries. Form to amend tax return You can generally arrange to have withholding tax reduced or eliminated on wages and other income that are eligible for tax treaty benefits. Form to amend tax return See Income Entitled to Tax Treaty Benefits in chapter 8. Form to amend tax return Topics - This chapter discusses: Typical tax treaty benefits, How to obtain copies of tax treaties, and How to claim tax treaty benefits on your tax return. Form to amend tax return Useful Items - You may want to see: Publication 901 U. Form to amend tax return S. Form to amend tax return Tax Treaties Form (and Instructions) 1040NR U. Form to amend tax return S. Form to amend tax return Nonresident Alien Income Tax Return 1040NR-EZ U. Form to amend tax return S. Form to amend tax return Income Tax Return for Certain Nonresident Aliens With No Dependents 8833 Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b) See chapter 12 for information about getting these publications and forms. Form to amend tax return Treaty Income A nonresident alien's treaty income is the gross income on which the tax is limited by a tax treaty. Form to amend tax return Treaty income includes, for example, dividends from sources in the United States that are subject to tax at a tax treaty rate not to exceed 15%. Form to amend tax return Nontreaty income is the gross income of a nonresident alien on which the tax is not limited by a tax treaty. Form to amend tax return Figure the tax on treaty income on each separate item of income at the reduced rate that applies to that item under the treaty. Form to amend tax return To determine tax on nontreaty income, figure the tax at either the flat 30% rate or the graduated rate, depending upon whether or not the income is effectively connected with your trade or business in the United States. Form to amend tax return Your tax liability is the sum of the tax on treaty income plus the tax on nontreaty income, but cannot be more than the tax liability figured as if the tax treaty had not come into effect. Form to amend tax return Example. Form to amend tax return Arthur Banks is a nonresident alien who is single and a resident of a foreign country that has a tax treaty with the United States. Form to amend tax return He received gross income of $25,850 during the tax year from sources within the United States, consisting of the following items: Dividends on which the tax is limited to a 15% rate by the tax treaty $1,400 Compensation for personal services on which the tax is not limited by the tax treaty 24,450 Total gross income $25,850 Arthur was engaged in business in the United States during the tax year. Form to amend tax return His dividends are not effectively connected with that business. Form to amend tax return He has no deductions other than his own personal exemption. Form to amend tax return His tax liability, figured as though the tax treaty had not come into effect, is $3,060 determined as follows: Total compensation $24,450 Less: Personal exemption 3,900 Taxable income $20,550 Tax determined by graduated rate (Tax Table column for single taxpayers) $2,640 Plus: Tax on gross dividends ($1,400 × 30%) 420 Tax determined as though treaty had not come into effect $3,060 Arthur's tax liability, figured by taking into account the reduced rate on dividend income as provided by the tax treaty, is $2,850 determined as follows: Tax determined by graduated rate (same as figured above) $2,640 Plus: Tax on gross dividends ($1,400 × 15%) 210 Tax on compensation and dividends $2,850 His tax liability, therefore, is limited to $2,850, the tax liability figured using the tax treaty rate on the dividends. Form to amend tax return Some Typical Tax Treaty Benefits The following paragraphs briefly explain the exemptions that are available under tax treaties for personal services income, remittances, scholarships, fellowships, and capital gain income. Form to amend tax return The conditions for claiming the exemptions vary under each tax treaty. Form to amend tax return For more information about the conditions under a particular tax treaty, see Publication 901. Form to amend tax return Or, you may download the complete text of most U. Form to amend tax return S. Form to amend tax return tax treaties at IRS. Form to amend tax return gov. Form to amend tax return Technical explanations for many of those treaties are also available at that site. Form to amend tax return Tax treaty benefits also cover income such as dividends, interest, rentals, royalties, pensions, and annuities. Form to amend tax return These types of income may be exempt from U. Form to amend tax return S. Form to amend tax return tax or may be subject to a reduced rate of tax. Form to amend tax return For more information, see Publication 901 or the applicable tax treaty. Form to amend tax return Personal Services Nonresident aliens from treaty countries who are in the United States for a short stay and also meet certain other requirements may be exempt from tax on their compensation received for personal services performed in the United States. Form to amend tax return Many tax treaties require that the nonresident alien claiming this exemption be present in the United States for a total of not more than 183 days during the tax year. Form to amend tax return Other tax treaties specify different periods of maximum presence in the United States, such as 180 days or 90 days. Form to amend tax return Spending part of a day in the United States counts as a day of presence. Form to amend tax return Tax treaties may also require that: The compensation cannot be more than a specific amount (frequently $3,000), and The individual have a foreign employer; that is, an individual, corporation, or entity of a foreign country. Form to amend tax return Note. Form to amend tax return Under most treaties, income received as an employee (generally designated as dependent personal services) and income received as a self-employed person (generally designated as independent personal services or business income) are treated differently. Form to amend tax return Teachers, Professors, and Researchers Under many income tax treaties, nonresident alien teachers or professors who temporarily visit the United States for the primary purpose of teaching at a university or other accredited educational institution are not subject to U. Form to amend tax return S. Form to amend tax return income tax on compensation received for teaching for the first 2 or 3 years after their arrival in the United States. Form to amend tax return Many treaties also provide an exemption for engaging in research. Form to amend tax return Generally, the teacher or professor must be in the United States primarily to teach, lecture, instruct, or engage in research. Form to amend tax return A substantial part of that person's time must be devoted to those duties. Form to amend tax return The normal duties of a teacher or professor include not only formal classroom work involving regularly scheduled lectures, demonstrations, or other student-participation activities, but also the less formal method of presenting ideas in seminars or other informal groups and in joint efforts in the laboratory. Form to amend tax return If you entered the United States as a nonresident alien, but are now a resident alien, the treaty exemption may still apply. Form to amend tax return See Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens later under Resident Aliens. Form to amend tax return Employees of Foreign Governments All treaties have provisions for the exemption of income earned by certain employees of foreign governments. Form to amend tax return However, a difference exists among treaties as to who qualifies for this benefit. Form to amend tax return Under many treaties, aliens admitted to the United States for permanent residence do not qualify. Form to amend tax return Under most treaties, aliens who are not nationals or subjects of the foreign country do not qualify. Form to amend tax return Employees of foreign governments should read the pertinent treaty carefully to determine whether they qualify for benefits. Form to amend tax return Chapter 10 of this publication also has information for employees of foreign governments. Form to amend tax return Students, Apprentices, and Trainees Under some income tax treaties, students, apprentices, and trainees are exempt from tax on remittances received from abroad for study and maintenance. Form to amend tax return Also, under some treaties, scholarship and fellowship grants, and a limited amount of compensation received by students, apprentices, and trainees may be exempt from tax. Form to amend tax return If you entered the United States as a nonresident alien, but are now a resident alien, the treaty exemption may still apply. Form to amend tax return See Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens , later, under Resident Aliens. Form to amend tax return Capital Gains Most treaties provide for the exemption of gains from the sale or exchange of personal property. Form to amend tax return Generally, gains from the sale or exchange of real property located in the United States are taxable. Form to amend tax return Resident Aliens Resident aliens may qualify for tax treaty benefits in the situations discussed below. Form to amend tax return U. Form to amend tax return S. Form to amend tax return Residency Under Tax Treaty “Tie-Breaker” Rule In certain circumstances, individuals who are treated as residents of the United States under an income tax treaty (after application of the so-called “tie-breaker” rule) will be entitled to treaty benefits. Form to amend tax return (The “tie-breaker” rule is explained in chapter 1 under Effect of Tax Treaties. Form to amend tax return ) If this applies to you, you generally will not need to file a Form 8833 for the income for which treaty benefits are claimed. Form to amend tax return This is because the income will typically be of a category for which disclosure on a Form 8833 is waived. Form to amend tax return See Reporting Treaty Benefits Claimed . Form to amend tax return In most cases, you also will not need to report the income on your Form 1040 because the income will be exempt from U. Form to amend tax return S. Form to amend tax return tax under the treaty. Form to amend tax return However, if the income has been reported as taxable income on a Form W-2, Form 1042-S, Form 1099, or other information return, you should report it on the appropriate line of Form 1040 (for example, line 7 in the case of wages or salaries). Form to amend tax return Enter the amount for which treaty benefits are claimed in parentheses on Form 1040, line 21. Form to amend tax return Next to the amount write “Exempt income,” the name of the treaty country, and the treaty article that provides the exemption. Form to amend tax return On Form 1040, subtract this amount from your income to arrive at total income on Form 1040, line 22. Form to amend tax return Also follow the above procedure for income that is subject to a reduced rate of tax, instead of an exemption, under the treaty. Form to amend tax return Attach a statement to Form 1040 showing a computation of the tax at the reduced rate, the name of the treaty country, and the treaty article that provides for the reduced tax rate. Form to amend tax return Include this tax on Form 1040, line 61. Form to amend tax return On the dotted line next to line 61, write “Tax from attached statement” and the amount of the tax. Form to amend tax return Example. Form to amend tax return Jacques Dubois, who is a resident of the United States under Article 4 of the U. Form to amend tax return S. Form to amend tax return -France income tax treaty, receives French social security benefits. Form to amend tax return Under Article 18(1) of the treaty, French social security benefits are not taxable by the United States. Form to amend tax return Mr. Form to amend tax return Dubois is not required to file a Form 8833 for his French social security benefits or report the benefits on Form 1040. Form to amend tax return Special Rule for Canadian and German Social Security Benefits Under income tax treaties with Canada and Germany, if a U. Form to amend tax return S. Form to amend tax return resident receives social security benefits from Canada or Germany, those benefits are treated for U. Form to amend tax return S. Form to amend tax return income tax purposes as if they were received under the social security legislation of the United States. Form to amend tax return If you receive social security benefits from Canada or Germany, include them on line 1 of your Social Security Benefits Worksheet for purposes of determining the taxable amount to be reported on Form 1040, line 20b or Form 1040A, line 14b. Form to amend tax return You are not required to file a Form 8833 for those benefits. Form to amend tax return Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens Generally, you must be a nonresident alien student, apprentice, trainee, teacher, professor, or researcher in order to claim a tax treaty exemption for remittances from abroad for study and maintenance in the United States, for scholarship, fellowship, and research grants, and for wages or other personal service compensation. Form to amend tax return Once you become a resident alien, you generally can no longer claim a tax treaty exemption for this income. Form to amend tax return However, if you entered the United States as a nonresident alien, but you are now a resident alien for U. Form to amend tax return S. Form to amend tax return tax purposes, the treaty exemption will continue to apply if the tax treaty's saving clause (explained later) provides an exception for it and you otherwise meet the requirements for the treaty exemption (including any time limit, explained later). Form to amend tax return This is true even if you are a nonresident alien electing to file a joint return as explained in chapter 1. Form to amend tax return Some exceptions to the saving clause apply to all resident aliens (for example, under the U. Form to amend tax return S. Form to amend tax return -People's Republic of China treaty); others apply only to resident aliens who are not lawful permanent residents of the United States (green card holders). Form to amend tax return If you qualify under an exception to the treaty's saving clause, you can avoid income tax withholding by giving the payor a Form W-9 with the statement required by the Form W-9 instructions. Form to amend tax return Saving clause. Form to amend tax return Most tax treaties have a saving clause. Form to amend tax return A saving clause preserves or “saves” the right of each country to tax its own residents as if no tax treaty were in effect. Form to amend tax return Thus, once you become a resident alien of the United States, you generally lose any tax treaty benefits that relate to your income. Form to amend tax return However, many tax treaties have exceptions to the saving clause, which may allow you to continue to claim certain treaty benefits when you become a resident alien. Form to amend tax return Read the treaty to find out if it has a saving clause and an exception to it. Form to amend tax return Time limit for claiming treaty exemptions. Form to amend tax return Many treaties limit the number of years you can claim a treaty exemption. Form to amend tax return For students, apprentices, and trainees, the limit is usually 4–5 years; for teachers, professors, and researchers, the limit is usually 2–3 years. Form to amend tax return Once you reach this limit, you can no longer claim the treaty exemption. Form to amend tax return See the treaty or Publication 901 for the time limits that apply. Form to amend tax return How to report income on your tax return. Form to amend tax return In most cases, you also will not need to report the income on your Form 1040 because the income will be exempt from U. Form to amend tax return S. Form to amend tax return tax under the treaty. Form to amend tax return However, if the income has been reported as taxable income on a Form W-2, Form 1042-S, Form 1099, or other information return, you should report it on the appropriate line of Form 1040 (for example, line 7 in the case of wages, salaries, scholarships, or fellowships). Form to amend tax return Enter the amount for which treaty benefits are claimed in parentheses on Form 1040, line 21. Form to amend tax return Next to the amount write “Exempt income,” the name of the treaty country, and the treaty article that provides the exemption. Form to amend tax return On Form 1040, subtract this amount from your income to arrive at total income on Form 1040, line 22. Form to amend tax return Example. Form to amend tax return Mr. Form to amend tax return Yu, a citizen of the People's Republic of China, entered the United States as a nonresident alien student on January 1, 2009. Form to amend tax return He remained a nonresident alien through 2013 and was able to exclude his scholarship from U. Form to amend tax return S. Form to amend tax return tax in those years under Article 20 of the U. Form to amend tax return S. Form to amend tax return -People's Republic of China income tax treaty. Form to amend tax return On January 1, 2014, he became a resident alien under the substantial presence test because his stay in the United States exceeded 5 years. Form to amend tax return Even though Mr. Form to amend tax return Yu is now a resident alien, the provisions of Article 20 still apply because of the exception to the saving clause in paragraph 2 of the Protocol to the U. Form to amend tax return S. Form to amend tax return -People's Republic of China treaty dated April 30, 1984. Form to amend tax return Mr. Form to amend tax return Yu should submit Form W-9 and the required statement to the payor. Form to amend tax return Reporting Treaty Benefits Claimed If you claim treaty benefits that override or modify any provision of the Internal Revenue Code, and by claiming these benefits your tax is, or might be, reduced, you must attach a fully completed Form 8833 to your tax return. Form to amend tax return See below, for the situations where you are not required to file Form 8833. Form to amend tax return You must file a U. Form to amend tax return S. Form to amend tax return tax return and Form 8833 if you claim the following treaty benefits. Form to amend tax return You claim a reduction or modification in the taxation of gain or loss from the disposition of a U. Form to amend tax return S. Form to amend tax return real property interest based on a treaty. Form to amend tax return You claim a credit for a specific foreign tax for which foreign tax credit would not be allowed by the Internal Revenue Code. Form to amend tax return You receive payments or income items totaling more than $100,000 and you determine your country of residence under a treaty and not under the rules for residency discussed in chapter 1. Form to amend tax return These are the more common situations for which Form 8833 is required. Form to amend tax return Exceptions. Form to amend tax return You do not have to file Form 8833 for any of the following situations. Form to amend tax return You claim a reduced rate of withholding tax under a treaty on interest, dividends, rent, royalties, or other fixed or determinable annual or periodic income ordinarily subject to the 30% rate. Form to amend tax return You claim a treaty reduces or modifies the taxation of income from dependent personal services, pensions, annuities, social security and other public pensions, or income of artists, athletes, students, trainees, or teachers. Form to amend tax return This includes taxable scholarship and fellowship grants. Form to amend tax return You claim a reduction or modification of taxation of income under an International Social Security Agreement or a Diplomatic or Consular Agreement. Form to amend tax return You are a partner in a partnership or a beneficiary of an estate or trust and the partnership, estate, or trust reports the required information on its return. Form to amend tax return The payments or items of income that are otherwise required to be disclosed total no more than $10,000. Form to amend tax return You are claiming treaty benefits for amounts that are: Reported to you on Form 1042-S and Received by you: As a related party from a reporting corporation within the meaning of Internal Revenue Code section 6038A (relating to information returns on Form 5472 filed by U. Form to amend tax return S. Form to amend tax return corporations that are 25-percent owned by a foreign person), or As a beneficial owner that is a direct account holder of a U. Form to amend tax return S. Form to amend tax return financial institution or qualified intermediary, or a direct partner, beneficiary, or owner of a withholding foreign partnership or trust, from that U. Form to amend tax return S. Form to amend tax return financial institution, qualified intermediary, or withholding foreign partnership or trust. Form to amend tax return The exception described in (6) above does not apply to any amounts for which a treaty-based return disclosure is specifically required by the Form 8833 instructions. Form to amend tax return Penalty for failure to provide required information on Form 8833. Form to amend tax return If you are required to report the treaty benefits but do not, you may be subject to a penalty of $1,000 for each failure. Form to amend tax return Additional information. Form to amend tax return For additional information, see section 301. Form to amend tax return 6114-1(c) of the Income Tax Regulations. Form to amend tax return Table 9-1. Form to amend tax return Table of Tax Treaties (Updated through December 31, 2013) Country Official Text Symbol1 General Effective Date Citation Applicable Treasury Explanations or Treasury Decision (T. Form to amend tax return D. Form to amend tax return ) Australia TIAS 10773 Dec. Form to amend tax return 1, 1983 1986-2 C. Form to amend tax return B. Form to amend tax return 220 1986-2 C. Form to amend tax return B. Form to amend tax return 246 Protocol TIAS Jan. Form to amend tax return 1, 2004 Austria TIAS Jan. Form to amend tax return 1, 1999 Bangladesh TIAS Jan. Form to amend tax return 1, 2007 Barbados TIAS 11090 Jan. Form to amend tax return 1, 1984 1991-2 C. Form to amend tax return B. Form to amend tax return 436 1991-2 C. Form to amend tax return B. Form to amend tax return 466 Protocol TIAS Jan. Form to amend tax return 1, 1994 Protocol TIAS Jan. Form to amend tax return 1, 2005 Belgium TIAS Jan. Form to amend tax return 1, 2008 Bulgaria TIAS Jan. Form to amend tax return 1, 2009 Canada2 TIAS 11087 Jan. Form to amend tax return 1, 1985 1986-2 C. Form to amend tax return B. Form to amend tax return 258 1987-2 C. Form to amend tax return B. Form to amend tax return 298 Protocol TIAS Jan. Form to amend tax return 1, 1996 Protocol TIAS Dec. Form to amend tax return 16, 1997 Protocol TIAS Jan. Form to amend tax return 1, 2009 China, People's Republic of TIAS 12065 Jan. Form to amend tax return 1, 1987 1988-1 C. Form to amend tax return B. Form to amend tax return 414 1988-1 C. Form to amend tax return B. Form to amend tax return 447 Commonwealth of Independent States3 TIAS 8225 Jan. Form to amend tax return 1, 1976 1976-2 C. Form to amend tax return B. Form to amend tax return 463 1976-2 C. Form to amend tax return B. Form to amend tax return 475 Cyprus TIAS 10965 Jan. Form to amend tax return 1, 1986 1989-2 C. Form to amend tax return B. Form to amend tax return 280 1989-2 C. Form to amend tax return B. Form to amend tax return 314 Czech Republic TIAS Jan. Form to amend tax return 1, 1993 Denmark TIAS Jan. Form to amend tax return 1, 2001 Protocol TIAS Jan. Form to amend tax return 1, 2008 Egypt TIAS 10149 Jan. Form to amend tax return 1, 1982 1982-1 C. Form to amend tax return B. Form to amend tax return 219 1982-1 C. Form to amend tax return B. Form to amend tax return 243 Estonia TIAS Jan. Form to amend tax return 1, 2000 Finland TIAS 12101 Jan. Form to amend tax return 1, 1991 Protocol TIAS Jan. Form to amend tax return 1, 2008 France TIAS Jan. Form to amend tax return 1, 1996 Protocol TIAS Jan. Form to amend tax return 1, 2007 Protocol TIAS Jan. Form to amend tax return 1, 2010 Germany TIAS Jan. Form to amend tax return 1, 1990 Protocol TIAS Jan. Form to amend tax return 1, 2008 Greece TIAS 2902 Jan. Form to amend tax return 1, 1953 1958-2 C. Form to amend tax return B. Form to amend tax return 1054 T. Form to amend tax return D. Form to amend tax return 6109, 1954-2 C. Form to amend tax return B. Form to amend tax return 638 Hungary TIAS 9560 Jan. Form to amend tax return 1, 1980 1980-1 C. Form to amend tax return B. Form to amend tax return 333 1980-1 C. Form to amend tax return B. Form to amend tax return 354 Iceland TIAS Jan. Form to amend tax return 1, 2009 India TIAS Jan. Form to amend tax return 1, 1991 Indonesia TIAS 11593 Jan. Form to amend tax return 1, 1990 Ireland TIAS Jan. Form to amend tax return 1, 1998 Israel TIAS Jan. Form to amend tax return 1, 1995 Italy TIAS Jan. Form to amend tax return 1, 2010 Jamaica TIAS 10207 Jan. Form to amend tax return 1, 1982 1982-1 C. Form to amend tax return B. Form to amend tax return 257 1982-1 C. Form to amend tax return B. Form to amend tax return 291 Japan TIAS Jan. Form to amend tax return 1, 2005 Kazakhstan TIAS Jan. Form to amend tax return 1, 1996 Korea, South TIAS 9506 Jan. Form to amend tax return 1, 1980 1979-2 C. Form to amend tax return B. Form to amend tax return 435 1979-2 C. Form to amend tax return B. Form to amend tax return 458 Latvia TIAS Jan. Form to amend tax return 1, 2000 Lithuania TIAS Jan. Form to amend tax return 1, 2000 Luxembourg TIAS Jan. Form to amend tax return 1, 2001 Malta TIAS Jan. Form to amend tax return 1, 2011 Mexico TIAS Jan. Form to amend tax return 1, 1994 1994-2 C. Form to amend tax return B. Form to amend tax return 424 1994-2 C. Form to amend tax return B. Form to amend tax return 489 Protocol TIAS Oct. Form to amend tax return 26, 1995 Protocol TIAS Jan. Form to amend tax return 1, 2004 Morocco TIAS 10195 Jan. Form to amend tax return 1, 1981 1982-2 C. Form to amend tax return B. Form to amend tax return 405 1982-2 C. Form to amend tax return B. Form to amend tax return 427 Netherlands TIAS Jan. Form to amend tax return 1, 1994 Protocol TIAS Jan. Form to amend tax return 1, 2005 New Zealand TIAS 10772 Nov. Form to amend tax return 2, 1983 1990-2 C. Form to amend tax return B. Form to amend tax return 274 1990-2 C. Form to amend tax return B. Form to amend tax return 303 Protocol TIAS Jan. Form to amend tax return 1, 2011 Norway TIAS 7474 Jan. Form to amend tax return 1, 1971 1973-1 C. Form to amend tax return B. Form to amend tax return 669 1973-1 C. Form to amend tax return B. Form to amend tax return 693 Protocol TIAS 10205 Jan. Form to amend tax return 1, 1982 1982-2 C. Form to amend tax return B. Form to amend tax return 440 1982-2 C. Form to amend tax return B. Form to amend tax return 454 Pakistan TIAS 4232 Jan. Form to amend tax return 1, 1959 1960-2 C. Form to amend tax return B. Form to amend tax return 646 T. Form to amend tax return D. Form to amend tax return 6431, 1960-1 C. Form to amend tax return B. Form to amend tax return 755 Philippines TIAS 10417 Jan. Form to amend tax return 1, 1983 1984-2 C. Form to amend tax return B. Form to amend tax return 384 1984-2 C. Form to amend tax return B. Form to amend tax return 412 Poland TIAS 8486 Jan. Form to amend tax return 1, 1974 1977-1 C. Form to amend tax return B. Form to amend tax return 416 1977-1 C. Form to amend tax return B. Form to amend tax return 427 Portugal TIAS Jan. Form to amend tax return 1, 1996 Romania TIAS 8228 Jan. Form to amend tax return 1, 1974 1976-2 C. Form to amend tax return B. Form to amend tax return 492 1976-2 C. Form to amend tax return B. Form to amend tax return 504 Russia TIAS Jan. Form to amend tax return 1, 1994 Slovak Republic TIAS Jan. Form to amend tax return 1, 1993 Slovenia TIAS Jan. Form to amend tax return 1, 2002 South Africa TIAS Jan. Form to amend tax return 1, 1998 Spain TIAS Jan. Form to amend tax return 1, 1991 Sri Lanka TIAS Jan. Form to amend tax return 1, 2004 Sweden TIAS Jan. Form to amend tax return 1, 1996 Protocol TIAS Jan. Form to amend tax return 1, 2007 Switzerland TIAS Jan. Form to amend tax return 1, 1998 Thailand TIAS Jan. Form to amend tax return 1, 1998 Trinidad and Tobago TIAS 7047 Jan. Form to amend tax return 1, 1970 1971-2 C. Form to amend tax return B. Form to amend tax return 479 Tunisia TIAS Jan. Form to amend tax return 1, 1990 Turkey TIAS Jan. Form to amend tax return 1, 1998 Ukraine TIAS Jan. Form to amend tax return 1, 2001 United Kingdom TIAS Jan. Form to amend tax return 1, 2004 Venezuela TIAS Jan. Form to amend tax return 1, 2000 1(TIAS) Treaties and Other International Act Series 2Information on the treaty can be found in Publication 597, Information on the United States-Canada Income Tax Treaty. Form to amend tax return 3The U. Form to amend tax return S. Form to amend tax return -U. Form to amend tax return S. Form to amend tax return S. Form to amend tax return R. Form to amend tax return income tax treaty applies to the countries of Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan. Form to amend tax return Prev Up Next Home More Online Publications

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The Form To Amend Tax Return

Form to amend tax return 2. Form to amend tax return Accounting Periods and Methods Table of Contents Introduction Useful Items - You may want to see: Accounting Periods Accounting MethodsCash Method Accrual Method Combination Method Inventories Uniform Capitalization Rules Special Methods Change in Accounting Method Introduction You must figure your taxable income and file an income tax return for an annual accounting period called a tax year. Form to amend tax return Also, you must consistently use an accounting method that clearly shows your income and expenses for the tax year. Form to amend tax return Useful Items - You may want to see: Publication 538 Accounting Periods and Methods See chapter 12 for information about getting publications and forms. Form to amend tax return Accounting Periods When preparing a statement of income and expenses (generally your income tax return), you must use your books and records for a specific interval of time called an accounting period. Form to amend tax return The annual accounting period for your income tax return is called a tax year. Form to amend tax return You can use one of the following tax years. Form to amend tax return A calendar tax year. Form to amend tax return A fiscal tax year. Form to amend tax return Unless you have a required tax year, you adopt a tax year by filing your first income tax return using that tax year. Form to amend tax return A required tax year is a tax year required under the Internal Revenue Code or the Income Tax Regulations. Form to amend tax return Calendar tax year. Form to amend tax return A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. Form to amend tax return You must adopt the calendar tax year if any of the following apply. Form to amend tax return You do not keep books. Form to amend tax return You have no annual accounting period. Form to amend tax return Your present tax year does not qualify as a fiscal year. Form to amend tax return Your use of the calendar tax year is required under the Internal Revenue Code or the Income Tax Regulations. Form to amend tax return If you filed your first income tax return using the calendar tax year and you later begin business as a sole proprietor, you must continue to use the calendar tax year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. Form to amend tax return For more information, see Change in tax year, later. Form to amend tax return If you adopt the calendar tax year, you must maintain your books and records and report your income and expenses for the period from January 1 through December 31 of each year. Form to amend tax return Fiscal tax year. Form to amend tax return A fiscal tax year is 12 consecutive months ending on the last day of any month except December. Form to amend tax return A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. Form to amend tax return If you adopt a fiscal tax year, you must maintain your books and records and report your income and expenses using the same tax year. Form to amend tax return For more information on a fiscal tax year, including a 52-53-week tax year, see Publication 538. Form to amend tax return Change in tax year. Form to amend tax return Generally, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year, to request IRS approval to change your tax year. Form to amend tax return See the Instructions for Form 1128 for exceptions. Form to amend tax return If you qualify for an automatic approval request, a user fee is not required. Form to amend tax return If you do not qualify for automatic approval, a ruling must be requested. Form to amend tax return See the instructions for Form 1128 for information about user fees if you are requesting a ruling. Form to amend tax return Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. Form to amend tax return Your accounting method includes not only the overall method of accounting you use, but also the accounting treatment you use for any material item. Form to amend tax return You choose an accounting method for your business when you file your first income tax return that includes a Schedule C for the business. Form to amend tax return After that, if you want to change your accounting method, you must generally get IRS approval. Form to amend tax return See Change in Accounting Method, later. Form to amend tax return Kinds of methods. Form to amend tax return Generally, you can use any of the following accounting methods. Form to amend tax return Cash method. Form to amend tax return An accrual method. Form to amend tax return Special methods of accounting for certain items of income and expenses. Form to amend tax return Combination method using elements of two or more of the above. Form to amend tax return You must use the same accounting method to figure your taxable income and to keep your books. Form to amend tax return Also, you must use an accounting method that clearly shows your income. Form to amend tax return Business and personal items. Form to amend tax return You can account for business and personal items under different accounting methods. Form to amend tax return For example, you can figure your business income under an accrual method, even if you use the cash method to figure personal items. Form to amend tax return Two or more businesses. Form to amend tax return If you have two or more separate and distinct businesses, you can use a different accounting method for each if the method clearly reflects the income of each business. Form to amend tax return They are separate and distinct only if you maintain complete and separate books and records for each business. Form to amend tax return Cash Method Most individuals and many sole proprietors with no inventory use the cash method because they find it easier to keep cash method records. Form to amend tax return However, if an inventory is necessary to account for your income, you must generally use an accrual method of accounting for sales and purchases. Form to amend tax return For more information, see Inventories, later. Form to amend tax return Income Under the cash method, include in your gross income all items of income you actually or constructively receive during your tax year. Form to amend tax return If you receive property or services, you must include their fair market value in income. Form to amend tax return Example. Form to amend tax return On December 30, 2012, Mrs. Form to amend tax return Sycamore sent you a check for interior decorating services you provided to her. Form to amend tax return You received the check on January 2, 2013. Form to amend tax return You must include the amount of the check in income for 2013. Form to amend tax return Constructive receipt. Form to amend tax return You have constructive receipt of income when an amount is credited to your account or made available to you without restriction. Form to amend tax return You do not need to have possession of it. Form to amend tax return If you authorize someone to be your agent and receive income for you, you are treated as having received it when your agent received it. Form to amend tax return Example. Form to amend tax return Interest is credited to your bank account in December 2013. Form to amend tax return You do not withdraw it or enter it into your passbook until 2014. Form to amend tax return You must include it in your gross income for 2013. Form to amend tax return Delaying receipt of income. Form to amend tax return You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. Form to amend tax return You must report the income in the year the property is received or made available to you without restriction. Form to amend tax return Example. Form to amend tax return Frances Jones, a service contractor, was entitled to receive a $10,000 payment on a contract in December 2013. Form to amend tax return She was told in December that her payment was available. Form to amend tax return At her request, she was not paid until January 2014. Form to amend tax return She must include this payment in her 2013 income because it was constructively received in 2013. Form to amend tax return Checks. Form to amend tax return Receipt of a valid check by the end of the tax year is constructive receipt of income in that year, even if you cannot cash or deposit the check until the following year. Form to amend tax return Example. Form to amend tax return Dr. Form to amend tax return Redd received a check for $500 on December 31, 2013, from a patient. Form to amend tax return She could not deposit the check in her business account until January 2, 2014. Form to amend tax return She must include this fee in her income for 2013. Form to amend tax return Debts paid by another person or canceled. Form to amend tax return If your debts are paid by another person or are canceled by your creditors, you may have to report part or all of this debt relief as income. Form to amend tax return If you receive income in this way, you constructively receive the income when the debt is canceled or paid. Form to amend tax return For more information, see Canceled Debt under Kinds of Income in chapter 5. Form to amend tax return Repayment of income. Form to amend tax return If you include an amount in income and in a later year you have to repay all or part of it, you can usually deduct the repayment in the year in which you make it. Form to amend tax return If the amount you repay is over $3,000, a special rule applies. Form to amend tax return For details about the special rule, see Repayments in chapter 11 of Publication 535, Business Expenses. Form to amend tax return Expenses Under the cash method, you generally deduct expenses in the tax year in which you actually pay them. Form to amend tax return This includes business expenses for which you contest liability. Form to amend tax return However, you may not be able to deduct an expense paid in advance or you may be required to capitalize certain costs, as explained later under Uniform Capitalization Rules. Form to amend tax return Expenses paid in advance. Form to amend tax return You can deduct an expense you pay in advance only in the year to which it applies. Form to amend tax return Example. Form to amend tax return You are a calendar year taxpayer and you pay $1,000 in 2013 for a business insurance policy effective for one year, beginning July 1. Form to amend tax return You can deduct $500 in 2013 and $500 in 2014. Form to amend tax return Accrual Method Under an accrual method of accounting, you generally report income in the year earned and deduct or capitalize expenses in the year incurred. Form to amend tax return The purpose of an accrual method of accounting is to match income and expenses in the correct year. Form to amend tax return Income—General Rule Under an accrual method, you generally include an amount in your gross income for the tax year in which all events that fix your right to receive the income have occurred and you can determine the amount with reasonable accuracy. Form to amend tax return Example. Form to amend tax return You are a calendar year accrual method taxpayer. Form to amend tax return You sold a computer on December 28, 2013. Form to amend tax return You billed the customer in the first week of January 2014, but you did not receive payment until February 2014. Form to amend tax return You must include the amount received for the computer in your 2013 income. Form to amend tax return Income—Special Rules The following are special rules that apply to advance payments, estimating income, and changing a payment schedule for services. Form to amend tax return Estimated income. Form to amend tax return If you include a reasonably estimated amount in gross income, and later determine the exact amount is different, take the difference into account in the tax year in which you make the determination. Form to amend tax return Change in payment schedule for services. Form to amend tax return If you perform services for a basic rate specified in a contract, you must accrue the income at the basic rate, even if you agree to receive payments at a lower rate until you complete the services and then receive the difference. Form to amend tax return Advance payments for services. Form to amend tax return Generally, you report an advance payment for services to be performed in a later tax year as income in the year you receive the payment. Form to amend tax return However, if you receive an advance payment for services you agree to perform by the end of the next tax year, you can elect to postpone including the advance payment in income until the next tax year. Form to amend tax return However, you cannot postpone including any payment beyond that tax year. Form to amend tax return For more information, see Advance Payment for Services under Accrual Method in Publication 538. Form to amend tax return That publication also explains special rules for reporting the following types of income. Form to amend tax return Advance payments for service agreements. Form to amend tax return Prepaid rent. Form to amend tax return Advance payments for sales. Form to amend tax return Special rules apply to including income from advance payments on agreements for future sales or other dispositions of goods you hold primarily for sale to your customers in the ordinary course of your business. Form to amend tax return If the advance payments are for contracts involving both the sale and service of goods, it may be necessary to treat them as two agreements. Form to amend tax return An agreement includes a gift certificate that can be redeemed for goods. Form to amend tax return Treat amounts that are due and payable as amounts you received. Form to amend tax return You generally include an advance payment in income for the tax year in which you receive it. Form to amend tax return However, you can use an alternative method. Form to amend tax return For information about the alternative method, see Publication 538. Form to amend tax return Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both the following apply. Form to amend tax return The all-events test has been met. Form to amend tax return The test has been met when: All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy. Form to amend tax return Economic performance has occurred. Form to amend tax return Economic performance. Form to amend tax return You generally cannot deduct or capitalize a business expense until economic performance occurs. Form to amend tax return If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided or as the property is used. Form to amend tax return If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. Form to amend tax return An exception allows certain recurring items to be treated as incurred during a tax year even though economic performance has not occurred. Form to amend tax return For more information on economic performance, see Economic Performance under Accrual Method in Publication 538. Form to amend tax return Example. Form to amend tax return You are a calendar year taxpayer and use an accrual method of accounting. Form to amend tax return You buy office supplies in December 2013. Form to amend tax return You receive the supplies and the bill in December, but you pay the bill in January 2014. Form to amend tax return You can deduct the expense in 2013 because all events that fix the fact of liability have occurred, the amount of the liability could be reasonably determined, and economic performance occurred in that year. Form to amend tax return Your office supplies may qualify as a recurring expense. Form to amend tax return In that case, you can deduct them in 2013 even if the supplies are not delivered until 2014 (when economic performance occurs). Form to amend tax return Keeping inventories. Form to amend tax return When the production, purchase, or sale of merchandise is an income-producing factor in your business, you must generally take inventories into account at the beginning and the end of your tax year. Form to amend tax return If you must account for an inventory, you must generally use an accrual method of accounting for your purchases and sales. Form to amend tax return For more information, see Inventories , later. Form to amend tax return Special rule for related persons. Form to amend tax return You cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until you make the payment and the corresponding amount is includible in the related person's gross income. Form to amend tax return Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. Form to amend tax return If a deduction is not allowed under this rule, the rule will continue to apply even if your relationship with the person ends before the expense or interest is includible in the gross income of that person. Form to amend tax return Related persons include members of your immediate family, including only brothers and sisters (either whole or half), your spouse, ancestors, and lineal descendants. Form to amend tax return For a list of other related persons, see section 267 of the Internal Revenue Code. Form to amend tax return Combination Method You can generally use any combination of cash, accrual, and special methods of accounting if the combination clearly shows your income and expenses and you use it consistently. Form to amend tax return However, the following restrictions apply. Form to amend tax return If an inventory is necessary to account for your income, you must generally use an accrual method for purchases and sales. Form to amend tax return (See, however, Inventories, later. Form to amend tax return ) You can use the cash method for all other items of income and expenses. Form to amend tax return If you use the cash method for figuring your income, you must use the cash method for reporting your expenses. Form to amend tax return If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. Form to amend tax return If you use a combination method that includes the cash method, treat that combination method as the cash method. Form to amend tax return Inventories Generally, if you produce, purchase, or sell merchandise in your business, you must keep an inventory and use the accrual method for purchases and sales of merchandise. Form to amend tax return However, the following taxpayers can use the cash method of accounting even if they produce, purchase, or sell merchandise. Form to amend tax return These taxpayers can also account for inventoriable items as materials and supplies that are not incidental (discussed later). Form to amend tax return A qualifying taxpayer under Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. Form to amend tax return A qualifying small business taxpayer under Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. Form to amend tax return Qualifying taxpayer. Form to amend tax return You are a qualifying taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 17, 1998, is $1 million or less. Form to amend tax return (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing by 3. Form to amend tax return ) Your business is not a tax shelter, as defined under section 448(d)(3) of the Internal Revenue Code. Form to amend tax return Qualifying small business taxpayer. Form to amend tax return You are a qualifying small business taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 31, 2000, is more than $1 million but not more than $10 million. Form to amend tax return (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3. Form to amend tax return ) You are not prohibited from using the cash method under section 448 of the Internal Revenue Code. Form to amend tax return Your principal business activity is an eligible business (described in Publication 538 and Revenue Procedure 2002-28). Form to amend tax return Business not owned or not in existence for 3 years. Form to amend tax return If you did not own your business for all of the 3-tax-year period used in figuring your average annual gross receipts, include the period of any predecessor. Form to amend tax return If your business has not been in existence for the 3-tax-year period, base your average on the period it has existed including any short tax years, annualizing the short tax year's gross receipts. Form to amend tax return Materials and supplies that are not incidental. Form to amend tax return If you account for inventoriable items as materials and supplies that are not incidental, you will deduct the cost of the items you would otherwise include in inventory in the year you sell the items, or the year you pay for them, whichever is later. Form to amend tax return If you are a producer, you can use any reasonable method to estimate the raw material in your work in process and finished goods on hand at the end of the year to determine the raw material used to produce finished goods that were sold during the year. Form to amend tax return Changing accounting method. Form to amend tax return If you are a qualifying taxpayer or qualifying small business taxpayer and want to change to the cash method or to account for inventoriable items as non-incidental materials and supplies, you must file Form 3115, Application for Change in Accounting Method. Form to amend tax return See Change in Accounting Method, later. Form to amend tax return More information. Form to amend tax return For more information about the qualifying taxpayer exception, see Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. Form to amend tax return For more information about the qualifying small business taxpayer exception, see Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. Form to amend tax return Items included in inventory. Form to amend tax return If you are required to account for inventories, include the following items when accounting for your inventory. Form to amend tax return Merchandise or stock in trade. Form to amend tax return Raw materials. Form to amend tax return Work in process. Form to amend tax return Finished products. Form to amend tax return Supplies that physically become a part of the item intended for sale. Form to amend tax return Valuing inventory. Form to amend tax return You must value your inventory at the beginning and end of each tax year to determine your cost of goods sold (Schedule C, line 42). Form to amend tax return To determine the value of your inventory, you need a method for identifying the items in your inventory and a method for valuing these items. Form to amend tax return Inventory valuation rules cannot be the same for all kinds of businesses. Form to amend tax return The method you use to value your inventory must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. Form to amend tax return Your inventory practices must be consistent from year to year. Form to amend tax return More information. Form to amend tax return For more information about inventories, see Publication 538. Form to amend tax return Uniform Capitalization Rules Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for production or resale activities. Form to amend tax return Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Form to amend tax return You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Form to amend tax return Activities subject to the uniform capitalization rules. Form to amend tax return You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Form to amend tax return Produce real or tangible personal property. Form to amend tax return For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Form to amend tax return Acquire property for resale. Form to amend tax return Exceptions. Form to amend tax return These rules do not apply to the following property. Form to amend tax return Personal property you acquire for resale if your average annual gross receipts are $10 million or less. Form to amend tax return Property you produce if you meet either of the following conditions. Form to amend tax return Your indirect costs of producing the property are $200,000 or less. Form to amend tax return You use the cash method of accounting and do not account for inventories. Form to amend tax return For more information, see Inventories, earlier. Form to amend tax return Special Methods There are special methods of accounting for certain items of income or expense. Form to amend tax return These include the following. Form to amend tax return Amortization, discussed in chapter 8 of Publication 535, Business Expenses. Form to amend tax return Bad debts, discussed in chapter 10 of Publication 535. Form to amend tax return Depletion, discussed in chapter 9 of Publication 535. Form to amend tax return Depreciation, discussed in Publication 946, How To Depreciate Property. Form to amend tax return Installment sales, discussed in Publication 537, Installment Sales. Form to amend tax return Change in Accounting Method Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. Form to amend tax return A change in your accounting method includes a change in: Your overall method, such as from cash to an accrual method, and Your treatment of any material item. Form to amend tax return To get approval, you must file Form 3115, Application for Change in Accounting Method. Form to amend tax return You can get IRS approval to change an accounting method under either the automatic change procedures or the advance consent request procedures. Form to amend tax return You may have to pay a user fee. Form to amend tax return For more information, see the form instructions. Form to amend tax return Automatic change procedures. Form to amend tax return Certain taxpayers can presume to have IRS approval to change their method of accounting. Form to amend tax return The approval is granted for the tax year for which the taxpayer requests a change (year of change), if the taxpayer complies with the provisions of the automatic change procedures. Form to amend tax return No user fee is required for an application filed under an automatic change procedure generally covered in Revenue Procedure 2002-9. Form to amend tax return Generally, you must use Form 3115 to request an automatic change. Form to amend tax return For more information, see the Instructions for Form 3115. Form to amend tax return Prev Up Next Home More Online Publications